August 2009 Newsletter
August 1st, 2009
CANADIAN ADVANTAGE FUND
July was a solid month for the Canadian Fund, rising 10.34% while the S&P; TSX Index ended up 3.97%. Second quarter earnings season was the real catalyst for July’s gains, as results came in much better than expected. In general, top line sales growth was still weak, but bottom line earnings were helped by good cost and inventory control. The market was led by materials and industrials, as manufacturing indices suggest a production revival is afoot. The replenishing of inventories and subsequent increase in production bodes well for industrial metals, resources, and early cyclical companies as we move into the year end. Canada is one of the better positioned countries in the World that will benefit for the coming cyclical recovery. Some of our biggest winners last month were from the materials sector, as industrial demand for metals is helping revive demand and sales growth for companies like Teck Resources (TCK/B) and Thompson Creek Metals (TCM). On the financial side, Brookfield Asset Management (BAM/A) had a strong month, rising 15%, as their strong cash flows and growth strategy are starting to get some positive attention.
WORLD ADVANTAGE FUND
The World Fund also had a great month, rising 5.68% in July while the MSCI World Index ($C) squeaked out a gain of 0.59%. The Loonie rebounded strongly last month by 6.93%, dampening foreign asset values; however, we managed to avoid much of the US dollar weakness by holding a diversified basket of currencies from Europe, Asia, and Australia. Worldwide economic recovery appears imminent as manufacturing, industrial demand, and consumer spending is all beginning to rebound. Asia continues to lead the way with China posting 8% GDP growth in the second quarter. The US is also showing signs of demand revival, which should be enough to end the two year long recession. The economic recovery will be lumpy and slow for certain areas of the economy like consumer discretionary; however, there are some real opportunities around the World that are capitalizing on the cyclical economic rebound. Some of our biggest winners last month were Swiss heavy electrical equipment company ABB Ltd, German steel maker ThyssenKrupp, and US aluminum producer Alcoa.
Van Arbor Asset Management is an independent Asset Management company dedicated to creating wealth using a disciplined, proprietary investment strategy with an emphasis on preserving capital while generating superior long-term returns.
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